How a CVA might work for us

[boss 1,941]

Perhaps this is more in hope than expectation but here goes.

I stated yesterday that HMRC would not necessarily be able to prevent a CVA and have now had an opportunity to read the relevant parts of the Insolvency Act.

A CVA can basically be viewed as a contract - a binding contract among creditors of a company to accept a reduced payment in full and final settlement.

It is for the proposer of a CVA (in our case, presumably the Administrator) to put forward an arrangement which would then be separately voted on by the creditors and by the shareholders (we can assume the latter, Whyte, would vote in favour!).

The proposer must include all creditors but in the first instance it seems to be something of a judgement call on his part whether a claim amounts to a creditor and, if it does, at what amount. It would be for the creditor to later challenge this in court.

So at what amount does the Administrator include the "big tax case" in the list of creditors? If we assume the Administrator is not unfriendly towards Whyte, there are a few options:

- £0, on the basis that there was no established creditor at the relevant date (14/2)

- £1, to acknowledge the existence of the creditor, the amount of which cannot yet be determined

- £15m (say), being the independent expert opinion(!) received by the Administrator (which may already have been drafted)

In any of these scenarios, HMRC's vote would amount to less than 25% of the creditors and they would, on their own, be unable to stop the CVA.

Once the CVA had been approved, any creditors that emerged (say the result of the "big tax case" decision) would only be entitled to the already agreed dividend (pence in the pound) and the CVA itself would not be reopened. It's just that they wouldn't have had their (full, proportional) vote at the meeting.

It should be noted that a creditor has 28 days from the date of the meeting to challenge a decision on the grounds that: a) their interest has been unfairly prejudiced; or b) there was a material irregularity at the meeting. A few things to note on this:

- if the "big tax case" decision was not available within that timescale, it may be difficult for a court to go against any independent expert opinion already obtained by the Administrator

- HMRC would still get their dividend in respect of the "big tax case"

- the CVA would have been approved and Rangers' future assured; there would be political pressure for HMRC not to be the one to put Rangers into liquidation, not least from a jobs point of view

- HMRC may accept that they would lose any challenge and so, reluctantly, accede

- there would be no more money in the pot in any event, particularly for unsecured creditors

- HMRC would have proved their point, that football clubs are not immune to the reaches of HMRC

- there may already be case law (this is not my field) which indicated that £0 or £1 or £15m was the correct figure to use in the CVA proposal

- we have already "won" the first battle in court; perhaps a friendly judge wouldn't wish to be the brother who caused the liquidation of Rangers

It may not be a coincidence that the period allowed is 28 days and the process started on Monday, giving just enough time to be certain of the position by 31 March. If so, maybe a CVA proposal will emerge soon.

As I stated at the beginning, maybe this is more in hope...

[DarcheVinny 1,003]

Thanks for the info boss, much appreciated.

[Blue and True 311]

well I love it

[Strayk9 3]

Brilliant, thanks for that; I finally have it in terms I can follow easily and clutch on to!

[Tamb 126]

Surely hmrc being portrrayed as being owed less that 25% of the total debt means that we must owe an awful lot more than we thought to others. On the above figures £15 mil to them indicates that we are already in debt to the tune of £60 million +. Last year at takeover time our debt was £18million, or am I missing something?

[BolloBollo 36]

Surely hmrc being portrrayed as being owed less that 25% of the total debt means that we must owe an awful lot more than we thought to others. On the above figures £15 mil to them indicates that we are already in debt to the tune of £60 million +. Last year at takeover time our debt was £18million, or am I missing something?

Its 25% of creditors, not 25% of the debt.

[bankieblue 10]

lets hope this is the outcome . thanks for that boss .

[californiadreamin52 339]

Nice work, but still a few ifs and buts

[Colonel Mustard 380]

Surely hmrc being portrrayed as being owed less that 25% of the total debt means that we must owe an awful lot more than we thought to others. On the above figures £15 mil to them indicates that we are already in debt to the tune of £60 million +. Last year at takeover time our debt was £18million, or am I missing something?

I asked on another thread if Whyte was deliberately stacking up debt, to dilute HMRC's influence on any settlement from creditors in the event of administration.

I don't know the legalities of that, or if it's what Boss is getting at, but it's what it looked like to me (a financial illiterate tbh).

[BolloBollo 36]

I believe Whytes plan all along is to force the cva securing 75% of creditors without HMRC. Thus his status of main creditor.

I still believe his intention is to keep our club without losing our status. Yes we've got worse to come but it will get better soon enough!

[bankieblue 10]

I believe Whytes plan all along is to force the cva securing 75% of creditors without HMRC. Thus his status of main creditor.

I still believe his intention is to keep our club without losing our status. Yes we've got worse to come but it will get better soon enough!

[StudsLonniegan 9]

How is a CVA approved?

75% of unsecured creditors by value must approve a CVA. Remember this is 75% voting on the day. 50% of non-associated creditors by value must also vote in support.

http://goo.gl/bZnQL

[dan_ger 1,454]

Cheers Boss, good info.

[kplfishtank 4,667]

i had to put translate onto that boss... still came out in swahili but if its good give me thumbs up and not good give me anguish emoticon

[Getstiffed 8,863]

Boss the idea that Craig Whyte is fly enough to pull this off and its not about him trying to shaft the club doesnt work mate.

That'll leave no option but to go after the guilty partys. Couldnt have that though.

[oheisbaer 0]

I asked on another thread if Whyte was deliberately stacking up debt, to dilute HMRC's influence on any settlement from creditors in the event of administration.

I don't know the legalities of that, or if it's what Boss is getting at, but it's what it looked like to me (a financial illiterate tbh).

This thought entered my head last night, too. Can anyone clarify this point?

I haven't seen this posted elsewhere. Administration triggered the addition of at least another 6,807,000 GBP to the "non-HMRC Creditors" column, according to today's Herald:

"Duff and Phelps, a London-based company, were appointed as administrators yesterday, triggering a clause that means the 6807 fans who bought debentures in the club deck at Ibrox in 1990, at prices ranging from £1000 to £1650, are due their money back.

The issue document for the Rangers bond states that ''the debenture shall immediately become repayable at par without interest'' if ''any administrator or receiver is appointed to the undertaking of the company or any of its property or assets''."

[Blue and True 311]

the debt add as you see fit

Whyte 20000000

Ticketus 24000000

tax 12000000

others include Dundee Uts Hearts Rapid Bain etc

2000000

this is before the tax case

so the tax man is 12 of 58 so just under 20%

[boss 1,941]

How is a CVA approved?

75% of unsecured creditors by value must approve a CVA. Remember this is 75% voting on the day. 50% of non-associated creditors by value must also vote in support.

http://goo.gl/bZnQL

You'd be better reading the Act itself:

(3)A meeting so summoned shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security, except with the concurrence of the creditor concerned.

(4)Subject as follows, a meeting so summoned shall not approve any proposal or modification under which—

(a)any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts, or

(b)a preferential creditor of the company is to be paid an amount in respect of a preferential debt that bears to that debt a smaller proportion than is borne to another preferential debt by the amount that is to be paid in respect of that other debt.

However, the meeting may approve such a proposal or modification with the concurrence of the preferential creditor concerned.

[nachothelegend 1,932]

Would be a nice scenario.Cheers for trying to bring some clarity to all this.Hope it pans out like that.

[slimjim1690 4,534]

Brilliant, thanks for that; I finally have it in terms I can follow easily and clutch on to!

Cool!! now can you explain it to me please.

[J_RFC87 761]

I think an important point to add to boss' post is the benefits to the unsecured creditors.

Scenario 1

An administrator can effectively liquidate the company; which means the business stops operating, is wound up and the assets sold to the highest possible value to repay creditors in a line of preference (starting with the secured creditor, Craig Whyte, having priority to get every penny back before an unsecured creditor).

In this scenario, the unsecured creditors will be waiting for months (possibly even into years!) waiting for any scraps after the secured creditor is repaid from the sale of assets. Would Ibrox really sell for a high value? Who would buy a 50k seater stadium in Govan? Even if you strip it apart, what are the spare parts worth...? Murray Park may fetch decent value because of its location, but the property market has tanked so who would buy it and build on it?

I reckon this scenario is highly unlikely. It depends on who owns the assets as well (Ibrox, Murray Park etc).

Guaranteed value to unsecured creditors: £0 regardless of debt size

Realistic value to unsecured creditors: £0

Scenario 2

A CVA is proposed. Unsecured creditors get offered x pence in the £1 of their outstanding bills (let's say, 40p in the £1).

Guaranteed* value to unsecured creditors: 40p per £1, over x years (could be 6 months - 5 years)

Realistic value to unsecured creditors: 40p per £1 - it is contracted and agreed.

So why would an unsecured creditor fancy scenario 1 over scenario 2? Well they wouldn't. Get 40p per £1 now for a year or so, or wait a year and likely get £0.

* guaranteed, as long as Rangers stay alive and manage their cash better.

Rangers liabilities to creditors is effectively a fraction of what it was (in this example, 2/5)

-----------

So in short, it is better for creditors to buy into a CVA.

It all hinges on how much HMRC are owed and whether it pushes them over the key 25% threshold...

[Getstiffed 8,863]

I think an important point to add to boss' post is the benefits to the unsecured creditors.

Scenario 1

An administrator can effectively liquidate the company; which means the business stops operating, is wound up and the assets sold to the highest possible value to repay creditors in a line of preference (starting with the secured creditor, Craig Whyte, having priority to get every penny back before an unsecured creditor).

In this scenario, the unsecured creditors will be waiting for months (possibly even into years!) waiting for any scraps after the secured creditor is repaid from the sale of assets. Would Ibrox really sell for a high value? Who would buy a 50k seater stadium in Govan? Even if you strip it apart, what are the spare parts worth...? Murray Park may fetch decent value because of its location, but the property market has tanked so who would buy it and build on it?

I reckon this scenario is highly unlikely. It depends on who owns the assets as well (Ibrox, Murray Park etc).

Guaranteed value to unsecured creditors: £0 regardless of debt size

Realistic value to unsecured creditors: £0

Scenario 2

A CVA is proposed. Unsecured creditors get offered x pence in the £1 of their outstanding bills (let's say, 40p in the £1).

Guaranteed* value to unsecured creditors: 40p per £1, over x years (could be 6 months - 5 years)

Realistic value to unsecured creditors: 40p per £1 - it is contracted and agreed.

So why would an unsecured creditor fancy scenario 1 over scenario 2? Well they wouldn't. Get 40p per £1 now for a year or so, or wait a year and likely get £0.

* guaranteed, as long as Rangers stay alive and manage their cash better.

Rangers liabilities to creditors is effectively a fraction of what it was (in this example, 2/5)

-----------

So in short, it is better for creditors to buy into a CVA.

It all hinges on how much HMRC are owed and whether it pushes them over the key 25% threshold...

People have used the sentence "this is what Whyte does" as a wee dig at the guy the last few days. But if you really think about it........this is what Whyte does.

Firmly believe nothing is happening by accident.

[Spectre 1,663]

Its 25% of creditors, not 25% of the debt.

It's one and the same, it's 25% of creditors in terms of the debt owed to them

[Bluepeter9 5,167]

Perhaps this is more in hope than expectation but here goes.

I stated yesterday that HMRC would not necessarily be able to prevent a CVA and have now had an opportunity to read the relevant parts of the Insolvency Act.

A CVA can basically be viewed as a contract - a binding contract among creditors of a company to accept a reduced payment in full and final settlement.

It is for the proposer of a CVA (in our case, presumably the Administrator) to put forward an arrangement which would then be separately voted on by the creditors and by the shareholders (we can assume the latter, Whyte, would vote in favour!).

The proposer must include all creditors but in the first instance it seems to be something of a judgement call on his part whether a claim amounts to a creditor and, if it does, at what amount. It would be for the creditor to later challenge this in court.

So at what amount does the Administrator include the "big tax case" in the list of creditors? If we assume the Administrator is not unfriendly towards Whyte, there are a few options:

- £0, on the basis that there was no established creditor at the relevant date (14/2)

- £1, to acknowledge the existence of the creditor, the amount of which cannot yet be determined

- £15m (say), being the independent expert opinion(!) received by the Administrator (which may already have been drafted)

In any of these scenarios, HMRC's vote would amount to less than 25% of the creditors and they would, on their own, be unable to stop the CVA.

Once the CVA had been approved, any creditors that emerged (say the result of the "big tax case" decision) would only be entitled to the already agreed dividend (pence in the pound) and the CVA itself would not be reopened. It's just that they wouldn't have had their (full, proportional) vote at the meeting.

It should be noted that a creditor has 28 days from the date of the meeting to challenge a decision on the grounds that: a) their interest has been unfairly prejudiced; or b) there was a material irregularity at the meeting. A few things to note on this:

- if the "big tax case" decision was not available within that timescale, it may be difficult for a court to go against any independent expert opinion already obtained by the Administrator

- HMRC would still get their dividend in respect of the "big tax case"

- the CVA would have been approved and Rangers' future assured; there would be political pressure for HMRC not to be the one to put Rangers into liquidation, not least from a jobs point of view

- HMRC may accept that they would lose any challenge and so, reluctantly, accede

- there would be no more money in the pot in any event, particularly for unsecured creditors

- HMRC would have proved their point, that football clubs are not immune to the reaches of HMRC

- there may already be case law (this is not my field) which indicated that £0 or £1 or £15m was the correct figure to use in the CVA proposal

- we have already "won" the first battle in court; perhaps a friendly judge wouldn't wish to be the brother who caused the liquidation of Rangers

It may not be a coincidence that the period allowed is 28 days and the process started on Monday, giving just enough time to be certain of the position by 31 March. If so, maybe a CVA proposal will emerge soon.

As I stated at the beginning, maybe this is more in hope...

I have done or been involved in a number of these ( and a few pheonix' s ) and the administrator won't be walking into that meeting without a deal and hmrc are usually ok to work with ( much smaller scale) but as you say it's that legal position of how the impending liability (if there is one lol ) is handled. Is the 'issue' and I get the impression hmrc will do everything legal to force that liability into any deal or challenge any finding and the administrator can choose not to propose a Cva in 'our' timescale (football disaster) and I suspect in such a public bun fight the administrator ( pal or not) will have to play with a straight bat!! Difficult times. And a small point of note does the Cva not assume tickets will play ball and accept it?

[Getstiffed 8,863]

Perhaps this is more in hope than expectation but here goes.

I stated yesterday that HMRC would not necessarily be able to prevent a CVA and have now had an opportunity to read the relevant parts of the Insolvency Act.

A CVA can basically be viewed as a contract - a binding contract among creditors of a company to accept a reduced payment in full and final settlement.

It is for the proposer of a CVA (in our case, presumably the Administrator) to put forward an arrangement which would then be separately voted on by the creditors and by the shareholders (we can assume the latter, Whyte, would vote in favour!).

The proposer must include all creditors but in the first instance it seems to be something of a judgement call on his part whether a claim amounts to a creditor and, if it does, at what amount. It would be for the creditor to later challenge this in court.

So at what amount does the Administrator include the "big tax case" in the list of creditors? If we assume the Administrator is not unfriendly towards Whyte, there are a few options:

- £0, on the basis that there was no established creditor at the relevant date (14/2)

- £1, to acknowledge the existence of the creditor, the amount of which cannot yet be determined

- £15m (say), being the independent expert opinion(!) received by the Administrator (which may already have been drafted)

In any of these scenarios, HMRC's vote would amount to less than 25% of the creditors and they would, on their own, be unable to stop the CVA.

Once the CVA had been approved, any creditors that emerged (say the result of the "big tax case" decision) would only be entitled to the already agreed dividend (pence in the pound) and the CVA itself would not be reopened. It's just that they wouldn't have had their (full, proportional) vote at the meeting.

It should be noted that a creditor has 28 days from the date of the meeting to challenge a decision on the grounds that: a) their interest has been unfairly prejudiced; or b) there was a material irregularity at the meeting. A few things to note on this:

- if the "big tax case" decision was not available within that timescale, it may be difficult for a court to go against any independent expert opinion already obtained by the Administrator

- HMRC would still get their dividend in respect of the "big tax case"

- the CVA would have been approved and Rangers' future assured; there would be political pressure for HMRC not to be the one to put Rangers into liquidation, not least from a jobs point of view

- HMRC may accept that they would lose any challenge and so, reluctantly, accede

- there would be no more money in the pot in any event, particularly for unsecured creditors

- HMRC would have proved their point, that football clubs are not immune to the reaches of HMRC

- there may already be case law (this is not my field) which indicated that £0 or £1 or £15m was the correct figure to use in the CVA proposal

- we have already "won" the first battle in court; perhaps a friendly judge wouldn't wish to be the brother who caused the liquidation of Rangers

It may not be a coincidence that the period allowed is 28 days and the process started on Monday, giving just enough time to be certain of the position by 31 March. If so, maybe a CVA proposal will emerge soon.

As I stated at the beginning, maybe this is more in hope...

Boss if this is all agreed upon and we are granted the CVA how long would it take to come out of admin and would it happen in time to be eligable for Europe next season?